Disciplinary and Other FINRA Actions
Total Page：16
File Type：pdf, Size：1020Kb
Disciplinary and Other FINRA Actions Firms Expelled, Individuals Sanctioned Reported for North Woodward Financial Corp. (CRD® #104097, Birmingham, Michigan) and September 2015 Douglas Allen Troszak (CRD #2219763, Birmingham, Michigan). The firm was expelled from FINRA® membership and Troszak was barred from association with any FINRA member in any capacity. The Securities and Exchange FINRA has taken disciplinary actions Commission (SEC) sustained the sanctions following appeal of a National against the following firms and Adjudicatory Council (NAC) decision. The sanctions were based on findings individuals for violations of FINRA that the firm and Troszak failed to respond completely to FINRA requests for rules; federal securities laws, rules information and documents. The findings stated that the firm and Troszak also and regulations; and the rules of failed to timely amend Troszak’s Uniform Application for Securities Industry the Municipal Securities Rulemaking Registration or Transfer (Form U4) with material information about a federal Board (MSRB). tax lien that was filed against him. This matter has been appealed to the U.S. Court for Appeals for the Sixth Circuit. The expulsion and bar are in effect pending review. (FINRA Case #2010021303301) Firms Suspended, Individuals Sanctioned ACAP Financial Inc. (CRD #7731, Salt Lake City, Utah) and Gary Hume (CRD #1216949, Syracuse, Utah). The firm was fined $100,000, and was required to revise its procedures and retain an independent consultant to review and approve them. The firm was also suspended from receiving and liquidating penny stocks for which no registration statement was in effect until it implemented appropriate procedures that the consultant approved. Hume was fined $25,000, suspended from association with any FINRA member in any capacity for six months, and required to requalify before acting in any capacity requiring qualification. The decision was appealed to the U.S. Court of Appeals for the Tenth Circuit for review of the SEC order and the Court denied the petition for review. The SEC affirmed the sanctions the NAC imposed following the firm’s and Hume’s petition for review of the sanctions imposed. The firm and Hume stipulated to the findings of misconduct. The sanctions were based on findings that the firm, through a registered representative, sold 27 million unregistered shares of an entity to the public, resulting in proceeds of approximately $46,000. The findings stated that the firm and Hume, as its compliance officer, failed to take adequate measures to prevent the registered representative from selling the unregistered shares to the public. The firm and Hume relied on the lack of a restrictive legend on the stock certificates and the clearance of the stock through the transfer agent in making the determination 1 September 2015 that shares were freely tradable. The findings also stated that despite “red flags” that the stock sales may have been part of an illegal distribution, the firm and Hume failed to take steps to ensure that the registered representative ascertained the information necessary to determine whether the unregistered shares could be sold in compliance with Section 5 of the Securities Act of 1933. Hume failed to undertake any other due diligence to obtain information about the issuer of the securities. The findings also included that although Hume was responsible for creating and maintaining the firm’s written supervisory procedures (WSPs), the firm did not have written or formal procedures regarding restricted stock transactions or the receipt of stock certificates, given its business model. The firm’s procedures did not provide any guidance for determining whether the stock was freely tradable. The suspension is in effect from August 3, 2015, through February 2, 2016. (FINRA Case #2007008239001) Firms Fined, Individuals Sanctioned Rainmaker Securities, LLC (CRD #132995, Chicago, Illinois) and Glen Wayne Anderson (CRD #5030000, Chicago, Illinois) submitted an Acceptance, Waiver and Consent (AWC) in which the firm was censured and fined $125,000. Anderson was fined $10,000 and suspended from association with any FINRA member in any principal capacity for two months. Without admitting or denying the findings, the firm and Anderson consented to the sanctions and to the entry of findings that they failed to enforce the firm’s WSPs relating to adequate due diligence for unregistered private offerings. The findings stated that the firm marketed and sold unregistered private placement securities offerings. With respect to the offerings, the firm, acting by and through Anderson, who was the responsible principal, failed to evidence that adequate due diligence was conducted. In addition, with respect to three of the offerings, the firm and Anderson failed to complete and maintain a private placement compliance checklist required by the firm’s WSPs as evidence of its due diligence. The findings also stated that the firm solicited the offerings to prospective investors with whom the firm did not have a pre-existing, substantive relationship. As a result, the firm engaged in general solicitations of each of the offerings in contravention of Section 5 of the Securities Act of 1933. In addition, the firm and Anderson failed to enforce the firm’s WSPs prohibiting general solicitations. The findings also included that the firm distributed communications with the public that were not fair and balanced, did not provide a sound basis for evaluating any facts relating to a particular security, and contain exaggerated, unwarranted and misleading statements. The firm’s marketing document failed to disclose, prominently or otherwise, the firm as the broker-dealer through which private placements would be offered and sold. The firm also failed to enforce related WSPs. 2 Disciplinary and Other FINRA Actions September 2015 FINRA found that the firm allowed unregistered persons to engage in activity requiring registration and failed to enforce its WSPs requiring appropriate registration. The firm allowed a person who was not a registered principal to act in a principal capacity and failed to enforce related WSPs. The firm failed to register an office location as a branch office, failed to identify the office location as a branch office in its WSPs, and failed to describe when and how that branch office would be inspected. FINRA also found that the firm and Anderson failed to enforce compliance with its WSPs relating to customer suitability information. In addition, FINRA determined that the firm and Anderson failed to establish, maintain, and enforce written procedures that were reasonably designed to review and approve outside business activities as required by FINRA Rule 3270, and failed to enforce the firm’s procedures—which were also outdated—by failing to require registered representatives to complete outside business activity forms related to outside business activities of which the firm was notified. The firm and Anderson failed to document or otherwise evidence that the analysis required by Rule 3270 had been conducted for outside business activities. The firm failed to timely disclose outside business activities on Forms U4 and failed to enforce its WSPs to ensure accurate reporting of outside business activities on its representatives’ Forms U4. Moreover, FINRA found that the firm failed to conduct an independent anti-money laundering (AML) test for 2012 and failed to enforce related WSPs. Furthermore, FINRA found that the firm failed to have WSPs that adequately addressed the review and approval, and the ongoing monitoring, of outside websites maintained by registered representatives hyperlinked from the firm’s website, and failed to sufficiently document the review and approval of outside websites hyperlinked from the firm’s website. The findings also stated that the firm failed to review Uniform Termination Notices for Securities Industry Registration (Forms U5) of newly hired registered representatives who had previously been registered with other FINRA member firms, and failed to enforce related WSPs. The findings also included that the firm and Anderson failed to implement and enforce reasonable WSPs relating to email review. The firm did not perform annual tests and reviews to verify compliance with, and assess the effectiveness of, the firm’s correspondence policies and procedures, as required by its WSPs. The suspension is in effect from August 3, 2015, through October 2, 2015. (FINRA Case #2013035059001) Firms Fined Avenir Financial Group, Inc. (CRD #148490, New York, New York) submitted an AWC in which the firm was censured and fined $10,000. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it allowed an individual to associate with the firm and engage in securities business despite being statutorily disqualified. (FINRA Case #2013035129702) Disciplinary and Other FINRA Actions 3 September 2015 Barclays Capital Inc. (CRD #19714, New York, New York) submitted an AWC in which the firm was censured, fined $52,500, and required to revise its WSPs. Without admitting or denying the findings, the firm consented to the sanctions and to the entry of findings that it failed to report S1 transactions in Trade Reporting and Compliance Engine® (TRACE®)- eligible corporate debt securities to TRACE within the time required by FINRA Rule 6730. The findings stated that the firm failed to capture the correct trade execution time for S1 transactions in TRACE-eligible corporate debt securities.